S-Corp Tax Savings Calculator (2026)
Compare what you keep as a default LLC or sole proprietor against what you would keep with an S-Corp election, on your own numbers. Both sides start from the same profit, and both halves of payroll tax are counted.
Reviewed by Teja K, CPA · last reviewed . General information, not tax advice for your situation. A calculator is an estimate, not a filed return. How we research and review this.
After business expenses, before any salary
What you could defend for your role — not a suggestion
Payroll, 1120-S return, state fees. Leave at zero and the election looks better than it is
Enter your business net profit and the salary you would pay yourself to compare the two treatments.
Tax year 2026. Federal tax only — state tax and state entity fees are not included, and either can reverse the answer.
Where the saving actually comes from
A default LLC or sole proprietorship pays self-employment tax on the whole of its profit: 15.3% on the first portion, then 2.9% Medicare with no ceiling, plus a 0.9% surtax at higher incomes. There is no employer to pay half, so you pay both halves.
Under an S-Corp election you split the same profit into a salary, which bears payroll tax, and a distribution, which does not. The saving is the employment tax you no longer pay on the distribution portion — and nothing at all on the salary.
So the election is worth roughly 15.3% of whatever you can defensibly take as distribution rather than salary. It is a percentage of a slice, not a percentage of your profit. That distinction is where most of the disappointment comes from.
Above the 2026 Social Security wage base of $184,500 the Social Security element has already stopped, so on profit beyond that point the election only saves the 2.9% Medicare rate rather than the full 15.3%.
Why most S-Corp calculators overstate the saving
When you pay yourself a salary from your own S-Corp, two payroll taxes arise on it, not one. Your payslip shows 7.65% withheld from you. The company separately pays a matching 7.65%, and the company is you — that money comes out of the same profit and reduces what is left to distribute.
A calculator that counts only the withheld half reports roughly double the real saving. This one funds both, which is why the distribution below is smaller than profit minus salary.
- Employer Social Security and Medicare on the salary, paid by the company.
- Employee Social Security and Medicare on the same salary, withheld from you.
- The 0.9% Additional Medicare Tax at higher salaries, which the employee pays and the employer does not.
The salary is an input here, and that is deliberate
This calculator does not suggest a salary, because no honest tool can. The IRS standard is facts and circumstances: what you would have to pay someone else to do your job, judged on duties, experience, time spent in the business and comparable pay in your field and region.
The incentive is obvious — set the salary low, take more as distribution, save more tax — and the IRS is entirely aware of it. An unreasonably low salary can be reclassified, with back payroll tax, interest and penalties, and the saving you modelled becomes a liability instead.
So enter the salary you could defend in front of an examiner, not the salary that makes the number look best. If you are not sure what that is, that is the part worth paying someone to establish.
A salary of zero with the whole profit taken as distribution is the specific arrangement that gets reclassified. The calculator will model it, and will tell you not to.
What the election costs, which is the other half of the answer
An S-Corp is not free to run, and the recurring cost is what decides the answer at moderate profit. Enter your best estimate of the annual total in the compliance cost field — if you leave it at zero, the comparison flatters the election.
- Running payroll, whether through a provider or by hand, including quarterly Form 941 filings and a year-end W-2 to yourself.
- An annual Form 1120-S business return with a Schedule K-1, which is a separate filing from your personal return.
- Federal and state unemployment tax on the payroll. FUTA is small and capped; state unemployment tax is set by your state and rated on your own history, so no general figure exists.
- In several states, an annual franchise tax or minimum entity fee that a disregarded LLC does not pay. This is state-specific and is not included anywhere in this estimate.
Below a certain profit these costs exceed the employment tax saved and the election loses money. There is no universal crossover figure, which is precisely why this page asks for your numbers instead of publishing a threshold.
If you are on a visa or have income in India
Two things matter here that a general S-Corp calculator will not mention.
First, eligibility. The S-election is restricted to entities whose shareholders are US citizens or resident aliens, so a non-resident alien cannot hold S-Corp shares and the election is unavailable regardless of profit. An H-1B holder who meets the substantial presence test is normally a resident alien, so shareholder eligibility is usually not the obstacle — but whether your visa permits you to work in your own business is an immigration question, not a tax one, and it outranks this calculation.
Second, the state layer. States are not parties to the India-US tax treaty, and several charge an S-Corp an annual franchise tax or minimum fee that a disregarded LLC escapes. Both sit outside this federal estimate and both can move the answer.
Sources
Frequently Asked Questions
How much does an S-Corp election save?
Roughly 15.3% of whatever you take as distribution rather than salary, less the cost of running the S-Corp. It saves nothing on the salary itself, and above the Social Security wage base it saves only the 2.9% Medicare rate. That is why the same election can be worth several thousand dollars at one profit level and cost money at another.
At what profit is an S-Corp worth it?
There is no universal figure, and anyone quoting one is guessing at two things they cannot know: what salary you can defend for your role, and what the extra compliance costs you where you are. Enter both above and the answer is specific to you. As a general shape, the election tends to lose money at modest profit and pay for itself several times over well above it.
What salary should I pay myself?
This calculator will not tell you, because there is no formula. The test is what you would have to pay someone else to do your job, judged on duties, experience, hours and comparable pay. Setting it too low is the single most examined point in S-Corp taxation and can be reclassified with back tax, interest and penalties. It is worth establishing properly rather than estimating.
Is an LLC or an S-Corp better?
They are not alternatives. An LLC is a legal entity formed under state law; S-Corp is a federal tax classification that an LLC or a corporation can elect. So the real choice is not LLC against S-Corp but how your LLC is taxed — by default, or as an S-Corp. This page compares those two treatments of the same entity.
Does this include state tax?
No. This is federal only, and state tax is the most common reason the real answer differs from a federal estimate. Several states levy a franchise tax or minimum annual fee on an S-Corp that a disregarded LLC does not pay, which can reverse the conclusion entirely at moderate profit.
Why is my distribution smaller than profit minus salary?
Because the company also pays the employer half of Social Security and Medicare on your salary, and that comes out of profit before anything can be distributed. It is a real cost of paying yourself a salary and is the figure most S-Corp calculators leave out.
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